Loss Leader - Losing Money To Make Money
Why do some firms deliberately lose money, in order to make money? A loss leader is bait and hook tactic used by several firms that looks to lure customers into their stores or in their platforms with the expectation that they will make a profit off of the customer on other products or over the long-run.
Managing Effective Price Promotions
Every customer loves a good deal, but new and small businesses often are ineffective in managing price promotions and discounts effectively. A good price promotion and discount program incentivizes new customers to try and use your product, but keeps current customers paying regular price by choice and helps to increase your long-term profits.
Choosing the Right Pricing Strategy
Pricing decisions for a firm can strongly influence the profits that a firm reaps; however, finding the right price and pricing strategy can be a challenge. The best way to start with determining price is to take into account not only your costs, but your competitor pricing, and the difference in value your product offers compared to the competition.
How To Price a New Product
Getting the price of your new product is critical to the potential customer adoption. Like they say, you only get once chance to make a good impression and if you price your product too high you run the risk of scaring away customers, while if you price your product too low, you run the risk of leaving profits on the table.
Pricing in a Retail Environment
If one industry has been hit the hardest by the advent of the internet, the retail industry has been it. The internet has enabled consumers to price compare with a click of a button and some technologies even allow consumers with smart phones to scan a bar-code of a product at one store and see what the prices are at other stores online and offline.
Effectively Using Price Promotions
The law of demand states that as a price becomes lower, demand increases and vice versa. Every business owner and consumer know that lower prices mean more unit sales and price promotions via sales and coupons are an effective means for creating more short-term demand for your products.
Leveraging the Law of Relativity With Your Pricing
Pricing is a difficult decision for many new businesses. Often pricing is done by copying the same format as other competitors in the same industry thus offering little differentiation between firms. Knowing how to use the law of relativity and how it drives purchasing decisions can help you and your firm use pricing strategy to successfully differentiate yourself from the competition and acquire new customers.